Indian Bank

NSE:INDIANB

Earnings Call Transcript 2024-Q4

[Anand Dama, analyst]

Welcome, everyone, to Indian Bank Results Con-Call for Fourth Quarter FY '24 hosted by Emkay Global. From Indian Bank management, we have MD and CEO Shri Shanti Lal Jainji; and Executive Director, Shri Mahesh Kumar Bajaj; Shri Ashutosh Choudhury; Shri Shiv Bajrang Singh; Shri Brajesh Kumar Singh.

We would request the MD sir to brief us with the key highlights of the results and strategic direction, particularly in terms of growth margins and asset quality, post that we will take up the Q&A from the participants. Over to you, sir.

[Shanti Jain, executive]

Good evening. Warm welcome to all the analysts and investors in our post results conference call of Indian Bank. Today we declared our Q4 and FY '24 results. So I will just touch about the brief on the financial performance. Our business has grown by 12% and of business deposits have grown by 11%, and credit has grown by 13%. In the deposit, 11% of our CASA has grown by 8% of which saving deposit has grown by 7% and bank would maintain the CASA ratio above 42 -- domestic CASA ratio above 42.

As far as credit is concerned, we have grown by 13%. Under the credit, the REM credit has grown by 14% and as a result, the REM advance to total advance have improved from 61% to 62%. Under the REM, the retail credit has grown by 15% and under the retail housing loan growth is 11%.

And our auto loan growth is around 49%, personal loan growth is at 10%. In agriculture, we have grown by 19%. And this 19% growth is basically crop loan growth is 19%. In crop loan, we are having around 78% of the crop loan as a gold loan, which is growing around 27%.

So other than the gold loan, balances are coming down. Investment credit has grown by 10%, agri-allied by 62% here measure is SHG, which is growing around 37%. MSME has grown by 6%, but you see the standard MSME, it has grown by around 10%.

Corporate credit has grown by 10%. So you see quarter-on-quarter basis, you see we are growing in equal proportions in all sectors, whether retail, agri, MSME and maintaining our REM to total credit around 61% to 62%.

This is the business side. As far as profitability side is concerned, you see our financial year '24 results as well as quarter, so our net profit for FY '24 has grown by 53%, and you see PBT, profit before tax, has grown by 85%, and this growth is basically growth in NII, which has grown by 15% and noninterest income, too, has grown by 10%.

Under the noninterest income, basically, trading profit has grown by 127%, fee-based income has grown by 11%. PSLC commission has grown by 37% and miscellaneous income has grown by 27%.

So NII growth and the noninterest growth is the main reason for our growth. In expenditure side what we have done, there is an increase in expenditures mainly under the head salary, which has increased by 23%, but we have done here because of the base revision provision, there is an incremental provision on a retirement benefits, also we have provided for ex-gratia pension for entire 4 or 5 years in the current quarters, and therefore, there is a slight increase.

All other overheads are -- slight increase in overhead is because of our expenditure on digitizations. So this year as a whole that has grown by 53% in net profit. If you see the quarter-on-quarter also our net profit has grown by 55%.

You see quarter-on-quarter up to December also, we have grown by 52% to 53%. So the 52% to 53% growth is happening quarter-on-quarter basis in the bank. So NII in the quarter has grown by again 9% and noninterest income has grown by 13%. Here also, the noninterest income growth is basically trading profit, fee income, ForEx income and PSLC commissions.

You see all our income streams are giving us a good profitability. And you see that here PBT has grown by 111%. You see last year, we were carrying forward the losses of [indiscernible] current year and entire amount is taxable. So the tax rate is coming around 26% or so quarter-on-quarter basis on a year-on-year basis. So this is about our profitability.

You see our gross and net NPA. Gross and net NPA has come down. You see we started our journey on amalgamation from 1st April '20 when the gross NPA was 11.39%, in the first year 9.85%, second year 8.47%, third year 5.95% and fourth year we are at 3.95%. So in the whole year, our gross NPA has come down by 2%.

Likewise, and you see on a quarter-on-quarter basis, our gross NPAs are coming around 50 bps plus/minus. So as a result, in the whole year, it is around 2%. Likewise, our net NPA is also coming down. We started our journey from 4.19%. Today, we are at 0.43%. Our provision coverage ratio has improved to 95%, 96%.

That is about our asset quality. And one more thing is that you see our SMA number, SMA number has come down significantly. It is now around 0.48%. And the slippage is INR 1,200 crores. This was -- there was no slippage in the corporate book, rather we have recovered in the corporate book.

And the slippage is INR 1,200 crores is coming mainly from the MSME INR 600 crores of, around INR 140-odd crores is from the restructuring and around INR 500 crores is from the agri that includes your KCC and other agri and SHG and around INR 100 crores is in retail, mainly because of housing and education.

So asset quality is under control. Now coming to the capital side. Our capital adequacy is 16.44%. You see, from year-on-year, it was 6.49% to 6.44%, around 60 bps reduction is because Tier 2 because we've paid the subordinated bond because we are having good capital adequacy ratio.

If you see our Tier 1 and CET, there's a growth. Of course, we have raised the capital by INR 4,000 crores having impact of 100 bps, but there is an impact of 57 bps because of the RBI guidelines. So considering this, our increase in capital adequacy is more than this over 31st March '23. And this shows that our generations are adequate to take care of our 12% or 13% credit growth where we can protect our capital adequacy and grow.

And because of the QIP, our shareholding has come down from 79% to close to 74%. So that recovery -- we told that we will be having a recovery of INR 8,000 crore in the whole year as against INR 8,000 crores, we have recovered INR 8,800 crores. So INR 800 crores more.

And our story of recovery more than the slippage is continuing. This year also out slippage of INR 6,700 crores, recovery was INR 8,800 crores. Last year also, the recovery was INR 8,500 crores and slippage was around INR 7,000 crores. So you also see on a quarter-on-quarter basis, our recovery is more than our slippage.

We have recovered around INR 2,858 crores from the AUC book. What happens, whereas in the P&L, it is coming less amount than this amount because what happens when you sell to NARCL or others, you get a 15% case and 85% in the shape of SR and all. So as per the guidelines, this provision, which we are having on SR, we are not reversing and as and when the money is collected for SM -- this SR will credit in the P&L account. So this will be a profit for our future.

Now slightly more provision we have made for standard asset because of -- on the basis on the portfolios. As far as NARCL is concerned, so we have transferred around 6 accounts having book balance of INR 3,000 crores, 4 bids are under process and 5 -- 4 accounts, we have received the bid and in the 5 account, it is under process.

So as far as COVID restructuring is concerned, it is now outstanding, which we started from INR 18,000 crores is today INR 8,000 crores, which is 1.68% of the book, which was around 4.5% book. And we are having around a 27% there against.

In FI side also, our market share is increasing both on EMZAY, JJBY, SBY, APY and all. And we are doing a number of things under digitization. So I request my colleague, Bajajji to briefly discuss about the digital journeys, and then we will open for Q&A.

[Mahesh Bajaj, executive]

Thank you, sir. Good evening, dear analysts and investors. As far as Indian Bank is concerned, digital transformation journey continues. Our transaction on the digital channels now 89% as on Q4 of financial year '24 as against 85% in the corresponding quarter financial year '23, 4% improvement.

And we have totally launched 78 digital journeys, out of which 34 digital lending journeys and 19 other digital process portals were launched during the financial year 2024. Our total digital business increased more than 14 times from INR 5,640 crores to INR 81,250 crores during the financial year '24.

And we are planning during this financial year 27 digital journeys, out of that 10 digital journeys we are planning in the Q1 of '24-'25. Bank has been coming out with various digital initiatives and enablers like e-OTS, digital lending platform, Tab Banking, EBG, e-locker, middleware, APIs, branch server centralization, death claim portal, settlement portal, document and record management system.

Apart from that, we have created fintech partnership -- government and fintech partnership for the purpose of the CASA. We are providing various solutions to our government departments as well as the institution like [indiscernible] SNS solution, API banking, mobile app for apartments and societies, DBT platform, solution to municipal corporation, solution for religious institutions, cess collection portal, e-governance solution, dynamic UPI QR code, web-based GPF solution.

Apart from that bank is having various key projects which are under implementation. Like omnichannel app, we are going to shortly on the retail as well as MSC and corporate bank, the customers on the Internet banking as well as mobile banking, CMS and cloud migration on the private cloud as well as the hybrid, data analytic model, CRM solutions, CBDC we have already started.

The GenAI some of the use cases we have already started after the tie up with [indiscernible] as well as our own team. Next-gen call center and 4-way data center also banking starting because we'll have a DC, near DC, DR, near DR for a zero lost data. Bank is committed in adding various digital journeys, products and processes and portal for ease of doing business and better customer experience. Thank you very much.

[Shanti Jain, executive]

And 1 point I forgot to tell you about the margin. We saw margin but -- so at the beginning of the year, we said that our margin will be 3.41% plus/minus 10 to 15 bps as against 3.41% domestic margin is 3.54% in the year as a whole. And you see in the last quarter, it was 3.52% improved from 3.49%.

So this is because of 2 or 3 reasons. There's an increase in the yield on advances as well as our yield on investment. Now we are open for questions-and-answers.

[Anand Dama, analyst]

Sir, before we open up the floor for Q&A, I had 1 question, which is like pertaining to the recent RBI guidelines, particularly of where basically RBI has said that banks need to provide 5% as the standard asset provision on the project finance exposures. So first, like how much is our project finance exposure? And what is your view on these guidelines?

[Shanti Jain, executive]

No, these are basically the draft guidelines, first point. And that draft guidelines, they are asking comments and we will also be sending our comments. And in the guideline, what they have done is, one is the construction phase in our operations space. In the construction phase, the provisioning requirement is high. And when the DCCO is achieved, it will come down and when the 20% payment will come, it will come down further.

This is the crux of the guideline and where the DCCO has increased. And if there is a [indiscernible] circular will be applicable. This is the crux of the guideline. The point is that impact on Indian bank.

First, I'd like to tell you that over 60% to 63% is our RIM. We are not a corporate bank. Remaining 37% is our corporate book, right? And even you see if you grow 10%, 11%, so on INR 1,80,000 crores, INR 18,000 crores and INR 20,000 crores of corporate book. So all are not in projects.

So very small amount will be on -- from our perspective, will be under the project under construction, very small amount. And the completion and 20%, of course, we live up 1% at the end of the day, is against 0.4% of the existing guidelines.

So -- of course, this we'll further examine here also and even we'll discuss in the IBA as well what is in the impact on that. So it is too early to say about the impact and everything, but not a big impact because we are not a corporate bank.

[Anand Dama, analyst]

Sir, but I mean, can you just repeat basically what is the overall project finance exposure that we have on the book?

[Shanti Jain, executive]

That I'll tell you, right? [indiscernible] I will tell you.

[Anand Dama, analyst]

Sure. And sir, do you believe that this 5% standard asset provisioning is too higher provision to ask for just based as the construction phase, this could actually derail the entire project financing cycle and the CapEx spending cycle that you are talking about?

[Shanti Jain, executive]

So this is the draft guidelines. We will submit our comments. We'll submit our comments, right? And you see for a construction project, you also give this loan over a period of 2 or 3 years. Suppose, it is a road project, it takes 2 or 3 years. So slightly, slightly you disburse, you don't disburse the entire amount on a first day. So we'll discuss, sir.

[Anand Dama, analyst]

Sure, sir, we'll discuss. [Operator Instructions] First question we have from Mr. Ashok Ajmera.

[Ashok Ajmera, analyst]

Congratulations for another good quarter and a year of the fantastic results by Indian Bank, where on all the parameters, the bank has improved its performance. Having said that, sir, I will take this point from Anand's point only a little bit to have a little more clarity on this RBI circular that your exposure to ports and road is INR 8,696 crores, other infra is INR 30,552 crores and CRE is INR 17,989 crores.

So altogether, it is around, I think, INR 60 crores, INR 65 crores of total exposure on this. So roughly how much is basically under implementation which will come under the higher provision as per this circular because this will be on existing as well as on incremental.

[Shanti Jain, executive]

Sir, entire exposure is not on project under implementation, right? We are having exposure in the shape of working capital also, right? We are -- on an ongoing basis, also some -- we are giving loans to them, right? So entire is not a project under implementation. This circular is basically project under implementation, right?

So basically, even in the road projects also, we are in the business from so many years. So 20% money has already been come. Then where is the question of this additional provisioning. So in case of a new project, which is we might have given in the last 2 or 3 years, that will have a major impact. Otherwise, the projects are already completed. And you see projects are already completed, and there is hardly any SMA. So projects are running that way good. We'll examine in detail and then we'll come out with the numbers because each and every project has to be assessed.

[Ashok Ajmera, analyst]

Yes, sir. Sir, I have just an information -- point of information. In Note #10, it says that you have formed a new subsidiary IndBank Global Support Services, which is on 9th of February 2024. So sir, what is the idea behind forming this subsidiary, how much capital the bank has invested? And what benefit the bank is expecting to draw from the subsidiary?

[Shanti Jain, executive]

So we have started with operational subsidiary with a capital of INR 10 crores. What this subsidiary will do, will do our back-office operations for us. The way you see -- the way the SBI has formed, the way the Bank of Baroda [indiscernible] these companies also will be doing out a number of activities for us for supposed collections support, then the operations part, even check issuance or even you can say, as a checker -- as a banker not as a checker, they will do a number of activities where we will save a huge cost and increase our TAT. So this company has started even the working in -- from the 1st of March. So first, we put them on a collection and also for giving us a lead for saving and current account opening and all.

[Ashok Ajmera, analyst]

The existing staff only has gone to the subsidiary of the bank or it has hired fresh people?

[Shanti Jain, executive]

No, we have recruited the people from the market and the subsidiary is recruiting the people from the market, not from our bank.

[Ashok Ajmera, analyst]

I think that must be the main idea to recruit the talent from outside and get the work done. Sir, my second point is, sir, on the advances credit growth. Now okay, we have been growing in 12%, 13% range. But at this level now, when the things are -- so much things are happening in the country and even the bigger -- some of the bigger banks are also coming in the range of 14%, 15%, 16%, some smaller banks are still at 18%, 20%.

Number 1 is that why can't we -- I mean, can we not think of revising this target for the future at least to 14%, 15%, the way the things are happening? And secondly, on SME front, we are on record as 6% only growth. You are saying that if you take it on standard assets, then it is 10%. But still, are we not comfortable with the way the SMEs workings are there or the credits going to the SMEs that we cannot think of increasing our loan book to the SMEs, sir?

[Shanti Jain, executive]

Okay. Sir, you see our credit growth is 13%. You see our gross NPA has come down from 5.95% to 3.95%. So if you our standard growth is 15%, which is in line with -- which is nearly in line with the industry, 15%, 16%-or-so.

Like the same story in MSME, but we are very cautious in MSME because you see our more NPAs are in MSME, corporate hardly any NPA with us. So slowly, slowly, we are growing also. But we are growing digitally also because we have started 2, 3 things.

Based to the cash flow, we have started giving loan, the preapproved business loan we started, based on the GST return we started, based on the cluster-based financing we started, security-based lending we started. So we are going in a very secured way there. Otherwise, our credit growth is 13%-plus to 15%.

[Ashok Ajmera, analyst]

Sir, if you look at the external rating slide 11 of 48. BB and below, in the corporate book, there is more than INR 100 crores corporate book, there is an outstanding of INR 11,275 crores. We are rated BB or below. And at the same time, a slight increase is also there from INR 9,008 crores to INR 11,275 crores at the end of '24 as compared to '23. So what kind of these corporates, which are rated below BB and not the government or state government, and it's still more than INR 100 crores? So how many such corporates are there? And what is the asset quality of this corporates against this credit?

[Shanti Jain, executive]

Basically, what under this bracket, basically, 3, 4 type of exposures are there. One is basically LRD exposures, where we are not getting rating, but the cash flow is being protected, first point. So because you see our LRD exposure has increased you see just prior to that, INR 13,000 crores became INR 17,000 crores, right? So 4,000, just you see Slide #10, and then you compare with Slide #11. So the one is the LRD exposure. Second kind of exposure here is basically in the -- here in the hospital or educational institutions and all, where we are having the cash flow. So these are 2 or 3 major areas where we are increasing our exposure where cash flow is protected.

[Ashok Ajmera, analyst]

Good, sir. My last question, sir, on the investment in this round of discussion, on the investment book. Our AFS book, we were told we had increased the duration, modified duration from 1.98% to 2.7%, 7.5%.

And we were of the view that -- I mean the bank was of the view that with the interest rates a little bit softening up, we'll make little more profit on AFS. And still the modified duration is 2.72% of the AFS book. So what are the views of our treasury going forward? And what do you see like in the coming quarters, how much -- how do we make the profit from this books?

[Shanti Jain, executive]

So I'm telling you we have done a number of things in the treasury side, sir. First is our investment has grown by 14%. So INR 1,88,000 crores or INR 2,14,000 crores or INR 2,26,000 crores of growth, right? This is the first point. So because we were knowing that the interest rate will come down, so we have made a huge investment at a good rate, good rate, even much higher than the current rate.

And you see holding yield, you see that our investment yield has increased. In fact, today, my holding yield for AFS book is 7.28%. And the HTM book is 7.06%. Virtually, my yield on total investment portfolio is 7.17%.

You see, last year my yield on investment was 6.80% and today, it is 7.17%. So you see 37 bps higher on INR 2,00,000 crores of book what kind of interest, more interest we will have in the next few years to come, and we have increased our duration. So first is that it will give us a better interest income in the time to come. And we also know that the interest rates will come down.

[Ashok Ajmera, analyst]

Sorry to interrupt you, sir, but the yield on investment in one of the slides, I think is quarter-on-quarter is 6.88% and year 6.80%.

[Shanti Jain, executive]

6.88% is a quarter number. We have done a churning in the last quarter as well. And as a result, as per new guidelines -- we moved to the new guidelines, right? So the new guidelines are different than the earlier guidelines because no, you cannot have a yearly churning, which we used to do in the old guidelines. So what we have done, 6.80% in fact holding it is 7.17%.

So this is because of churning. And this will give a better interest income to us in the time to come. Besides this, if the market is favorable, which we think that after third quarter -- after second quarter, third and fourth quarter, we'll have good opportunities. So this will give us an income as well resi profit on the interest income both, so that way we have built this book.

[Anand Dama, analyst]

Next question, we'll move on to Mona.

[Mona Khetan, analyst]

My first question is on the recovery from written-off book. So this year, if I look at the full year, you've recovered about INR 1,900 crore. If I have to understand the mix of various recovery channels, OTS and CRT, et cetera. Could you give some sense?

[Shanti Jain, executive]

Okay. Just I want to tell you 2, 3 things in recovery basically. So one is the Slide #16, right? That talks about the P&L. And Slide #29 which talks about the movement of NPA, right? So in Slide #29, you see the AUC recovery is INR 2,858 crores. So around INR 2,858 crores. I have booked at INR 1,800 crores in P&L.

So close to INR 1,000 crores is an amount which is SR or OCD, we will book income as and when it will come. So this is an income for the next few years. Now second point is the recovery from where we are having a recovery?

So recovery -- basically, we are having recovery from NCLT. You see the NCLT recovery in '23-'24 is INR 1,817 crores as against the last year recovery of INR 1,029 crores. So the INR 800 crore more recovery from the NCLT in '23-'24 is against '22-'23.

The compromise recovery is INR 1,505 crores. The sale to ARC is INR 464 crores, sale through surface is INR 861 crores. And other cash recovery is INR 3,072 crores and upgradation is INR 1,078 crores, all put together is INR 8,798 crores. So here if you see, every quarter we are recurring more than INR 2,000 crores.

[Mona Khetan, analyst]

Okay. Got it. Secondly, if I have to look at the employee expense, so does this also include the impact of pension provisions this quarter and how much would that be?

[Shanti Jain, executive]

No, what happens this quarter, our total staff expenses is INR 2,633 crores, right? Of this INR 1,015 crores is employee benefits. Out of this INR 1,015 crores, INR 388 crores is one item, which is basically a provision we have made for ex-gratia payments to be made to the pensioner for next 4 or 5 years.

[Mona Khetan, analyst]

Got it. So if I have to understand the employee expense run rate going forward, what would that be next year from a quarterly perspective?

[Shanti Jain, executive]

So what do we think that -- you see, the expenditures, salary is INR 6,400 crore and employee benefit is INR 2,800 crores. So put together is INR 9,200 crores is our expenditure for the year '23-'24, right? So considering the current salary bill and AS 15, this amount can be close to INR 9,000 crores.

[Mona Khetan, analyst]

Okay. From a full year perspective?

[Shanti Jain, executive]

Full year perspective.

[Mona Khetan, analyst]

Okay. And also finally, on the outstanding standard provisions, how much would that be for us?

[Shanti Jain, executive]

Outstanding standard asset provision we are having close to INR 7,900 some-odd crores.

[Mona Khetan, analyst]

Okay. And this includes restructured provisions as well?

[Shanti Jain, executive]

This includes all provisions.

[Mona Khetan, analyst]

Okay. Okay. And just finally, what would be the guidance on margins now?

[Shanti Jain, executive]

So you see what we have told you that 3.41% will be margin, we've ended with 3.54%. Now we are seeing that we are in a very tight liquidity market, right? In a tight liquidity market, naturally, the interest rates are slightly higher. And even the CASA growth in line with the total deposit growth may not be there. Though our endeavor will be to maintain our CASA more than 40%.

So -- and some lag effect of the deposits will also be there going forward. So in the current situation, as against 3.54%, our margin can be in the range of 3.4% to 3.5% -- 3.40% to 3.50% with, of course, 10, 15 bps here and there.

[Mona Khetan, analyst]

Okay. So it may come down by 5 to 10 bps as well?

[Shanti Jain, executive]

But you see last time also we have given a guidance of 3.41% and we ended with 3.54%.

[Anand Dama, analyst]

Our next question will take from Nishant Shah.

[Nishant Shah, analyst]

Congratulations on the good results. It's really remarkable. Sir, just coming back to this RBI project implements, like project circular. So you mentioned in your opening remarks that it's probably a little too early for you to kind of like give any comments. But just even if you can qualitatively answer like thought process wise, like the spread on some of these project loans will be 2%, 3%.

So mathematically, how does it work out if you have to kind of provide 5% upfront in year 1, 2, 3, it's likely you almost operate at a negative ROA for like first 2, 3 years. So is the current kind of format of this circular probably going to see light of day or -- if you can just kind of like give your thoughts around like how this changes, if at all, it changes?

[Shanti Jain, executive]

First, let me tell you, we had to further examine this circular. But the plain reading the 5% margin we are not having. This is correct because no bank is having a margin of 5%. But what the circular says that you have to build in 2% and then 3.5% and then 5%. By the time what will happen, some of the projects under construction will -- this is here we will achieve and will convert into operational and the requirement of them will come.

So this is an ongoing process. We are -- and after that, some 20% will come, some provision will release, some provision will come. This is a cycle it will happen. So slowly, slowly, maybe after -- and therefore, they have given a time also up to '27 to build up this provisions.

But if you read -- straight 5%, it appears to be high side, but they've given a time line. And then this is only a draft, we will submit our views also.

[Nishant Shah, analyst]

Correct, sir. Sir, I understand about the back book, will get time to kind of like build up provisions on the existing loans. But like on a go-forward basis, incrementally, say, tomorrow, some large corporate comes to you for like setting up a port project or whatever else, like -- how do you -- is there enough pricing power to go and tell an NTPC or an Adani or someone like that to say, "Hey, like I'm going to charge you 5% more because I have to provide 5% more upfront," like because incrementally, so you don't get that leeway right, of spreading that provision over 3 years?

[Shanti Jain, executive]

It is very difficult to get 5% in the competitive environment. It is very difficult to get 5%, but some margin we can always load. The way you see the way the RBI circular came for NBFCs and all. So some increase we have made in our -- and we have seen pricing, and this will be a new normal.

[Nishant Shah, analyst]

Correct, sir. Okay. Fair enough. And even if you have a ballpark number sometime during the call, if you can share about like what would be roughly the projects which are currently under implementation, that will be really helpful, sir.

[Shanti Jain, executive]

Okay.

[Anand Dama, analyst]

Next question will take from Ketan Athavale.

[Ketan Athavale, analyst]

I just wanted to know your credit cost outlook for FY '25 and FY '26.

[Shanti Jain, executive]

So the credit costs, you see have come down substantially. Our credit cost is basically 0.7% or so, right? Now the net NPA itself has come down to 0.43%, so it will come down further. You see, credit also was continuously coming down. And we are hardly any SMA one end.

[Ketan Athavale, analyst]

Can you just -- can you provide some guidance that would be very helpful?

[Shanti Jain, executive]

In terms of exact number?

[Ketan Athavale, analyst]

Yes, or a ballpark range also do.

[Shanti Jain, executive]

No, you see the 0.77% is a credit cost for the year now when my beginning net NPA was 0.9%. Now my beginning, net NPA is 0.43%. So naturally it will come down.

[Anand Dama, analyst]

Next question we'll take from Rakesh Kumar.

[Rakesh Kumar, analyst]

So just firstly, sir, on the liquidity front, what we're holding in the book? So we are continuously having investment deposit ratio on the NDTL close to around 29.5%, 30% kind of a number. So what is our thought process on that? Like, would we be able to use some of the liquidity in the next financial year?

[Shanti Jain, executive]

Right, you see in the last year, you see our -- in absolute terms also you see our deposit has grown by, say, INR 67,000 crores and our credit has grown by INR 60,000 crores, so around an incremental CD ratio of 90% in the '23-24. We are sitting at a CD ratio of 77%, 78%, right?

Now going forward, we would like to plan in a similar way. As far as liquidity is concerned, we are having around INR 44,000 crores of excess SLR as on date also. So what happens, some of the money we'll will utilize for credit, since we will be getting more return under that credit.

And one more point is that liquidity is available. The issue is that at what price you are taking. So we don't want to be outlier in the price and take money and then it will impact our NII and all. So you see we will be able to maintain our margins, NII growth and everything.

So we will be growing in a very planned way, but like to maintain our CASA 40%-plus. So our average deposit costs will come down. At the same time, on the credit side also, you want to grow retail, agri, MSME, corporate equal proportions or so. So better yield and better margin.

[Rakesh Kumar, analyst]

The HTM book that we have, would that all in the money or there would be some loss in the HTM book at the current yield?

[Shanti Jain, executive]

No, you see the -- I told you that my HTM yield is 7.06%. HTM is -- they are not required to make provisions and all, 7.06% we are having.

[Rakesh Kumar, analyst]

No, I'm just thinking from the point of view that to what extent we can liquidate that SLR and use that into the CDR, so from that perspective, I was trying to understand that what is the position on the HTM book, so -- are we in the money or out of the money in the HTM book?

[Shanti Jain, executive]

No, in the HTM -- really, we are having good AFS book as well in the -- as per the new guideline also we created good AFS book and HFT book. Even in the HFT or FVTPL our holding yield is put together is basically 8.61%, so that's good book HFT and AFS, so opportunities are there, and we are -- if the need arises, we'll always square it up and use it for credit.

[Rakesh Kumar, analyst]

And sir, LCR -- currently, the LCR would be, sir, March end, LCR?

[Shanti Jain, executive]

LCR is around 132%, 133%.

[Rakesh Kumar, analyst]

Okay. And sir, this quarter, we have a lower credit yield on a calculated basis on a quarterly average balances. So any specific reason for the lower credit yield this quarter?

[Shanti Jain, executive]

No, but you see our yield on advances have improved by 3 bps over the December quarter. What happens that to play here, we are in 60% MCLR book and 30%, 34% is the repo. So repo there is no change. Of course, we have increased our MCLR. And as a result, our yield has improved slightly. And that MCLR also 1 year MCLR will come for repricing after 1 year.

[Rakesh Kumar, analyst]

And sir, have we reversed any access provision on the loans sold to ARC close to around INR 80 crores, INR 85 crores this quarter?

[Shanti Jain, executive]

Not, because whatever money we have received cash, we have reversed up to that amount only. But the money which we received in the shape of SR or OCD or NCD as and when the money will come, we'll reverse.

[Rakesh Kumar, analyst]

Actually, sir, like I was going through the -- this thing, your notes to accounts, so here, we have given in '18 that there is a total reversal of INR 232 crores and INR 149 crores was the reversal as on December -- December end. So the residual amount, we would have reversed this quarter?

[Shanti Jain, executive]

No, this reversal is up to the extent of cash received.

[Rakesh Kumar, analyst]

Correct. Okay. So we have not credited to the P&L this quarter to that extent?

[Shanti Jain, executive]

No, no. Whatever money SR or OCD and NCD we have received, it is basically as and when we'll receive money. You see this SR is guaranteed by the government even in 5 years period also. By the time NARCL will sell the asset and will give money. So this money will come every year to us or other every quarter to us, some money will come and then we will keep on reversing that part.

[Anand Dama, analyst]

Next question we'll take from Dixit Doshi.

[Dixit Doshi, analyst]

So a couple -- 1 question and 1 clarification. So firstly, what kind of recovery target we have for next year? And how much is our written-off pool as of today?

[Shanti Jain, executive]

Two things, sir. Our return of pool is around INR 39,000 crores. So INR 39,000 crores plus INR 21,000 crores, INR 22,000 crores, so INR 60,000 crores of NPA we are having virtually.

Last time, we said that INR 8,000 crores recovery and ended up with INR 8,800 crores. This time also, we are planning between INR 7,000 crores to INR 8,000 crores of recovery.

[Dixit Doshi, analyst]

Okay. And -- so 1 question regarding the RBI guidelines on the project finance. So there was some section of the investors -- there was some confusion that whether this 5% provision is from the day 1 or is the DCCO extension will be availed then only the 5% provision. Any planning you have?

[Shanti Jain, executive]

No, no, 5% provision is till the DCCO is achieved, right? Construction phase. And I'm telling you, suppose we have given a loan, say, sanction of loan of INR 100. First year, we can disburse INR 20, next year INR 30, INR 40, the next year remaining, so the provision will attract only on INR 20, not on INR 100. On the third year, it will, of course, attract that provision of INR 100; fourth year, it will come back.

[Anand Dama, analyst]

Next question will take from Jai Mundhra.

[Jai Mundhra, analyst]

I have a couple of questions. Sir, first is the corporate slippages are negative this quarter. right? So is this fair to understand that there would be some slippages, but then you would have recovered slippages from the previous quarter and hence, this quarter slippages are negative. I mean, why the fresh slippages are negative number?

[Shanti Jain, executive]

First time you are seeing negative number? This is the recovery, sir. You've on 1 side only.

[Jai Mundhra, analyst]

No, so I wanted to check that. So let's say, there were some slippages, but you recovered during the same quarter...

[Shanti Jain, executive]

Yes, yes. Because we are doing on quarter-on-quarter basis.

[Jai Mundhra, analyst]

Okay. So this is the slippages number that we show is after [indiscernible] quarter recovery, right?

[Shanti Jain, executive]

As a whole, naturally your slippage will be less.

[Jai Mundhra, analyst]

Okay. Understood. So that is one. And second, sir, if I see our recovery number, total cash recovery number, which is INR 2,017 crores this quarter and INR 2,509 crores this quarter -- previous quarter, that number has changed, sir. I mean from previous -- I think it was some lower number. It has been revised up the third quarter number. Any specific reason? Or how does this work, sir? Because the previous numbers have also revised upwards.

[Shanti Jain, executive]

I'll come back to you. Same number, I think we are not changed. Why should we change.

[Mahesh Bajaj, executive]

Yes. In the last presentation, this number is lower the total cash recovery.

[Shanti Jain, executive]

December, you're talking about the December '23 quarter?

[Jai Mundhra, analyst]

Yes, sir.

[Shanti Jain, executive]

Let me see the presentation of December '23. No, it is INR 2,509 crores only, sir. INR 2,265 crores is a September number, sir. INR 2,509 crores correct, same number, sir.

[Jai Mundhra, analyst]

Okay. So what I had is INR 2,340 crores, but anyway, that is...

[Shanti Jain, executive]

Your own calculation you might have done it. Yes, INR 2,340 crores is just above. Sir, just below that INR 2,509 crores, same number.

[Jai Mundhra, analyst]

Right, right. Okay. Understood. And sir, this quarter, could you give...

[Shanti Jain, executive]

Yes, yes, yes. Correction. Just a minute. It was INR 2,340 crores, second is INR 2,509 crores. But number INR 2,509 crores is final.

[Jai Mundhra, analyst]

Right. Okay. Understood. And sir, this quarter, out of INR 898 crores of cash recovery and upgrade, if you can bifurcate what is the cash recovery and what is the upgrade?

[Shanti Jain, executive]

So major part is basically what happens by the time you reach to the fourth quarter. So your -- virtually, your cash recovery is more. So major part is basically cash.

[Jai Mundhra, analyst]

Sir, a small question on personal loan, right? So we were -- we had started this business and the portfolio is very small. Still, the quarter-on-quarter number has declined, the outstanding number has declined. So anything to read into -- are you seeing any headwinds? Or is there a change in the strategy in the personal loan business? Because from INR 8,600 crores, it has now fallen to INR 8,500 crores on a Q-o-Q basis. It was going at a rapid pace.

[Shanti Jain, executive]

You know what happens, in a personal loan, you get recovery also very fast. Because the quality of customers, which we are lending basically those are existing customers, salaried customer, CIBIL score more than 730 or 750. Majority are more than even 750 CIBIL score. So you get recovery also very fast and period of loan is also very small.

[Jai Mundhra, analyst]

Okay. And lastly, sir, this pension that you said INR 388 crores that we have provided on ex-gratia, this is the same thing, right, that we have provided last quarter some INR 300-odd crores on the pension.

[Shanti Jain, executive]

No, no, no. This is the first time we provided because settlement was side only in the last quarter, not in December quarter.

[Jai Mundhra, analyst]

Okay. So this is a new clause in the settlement, is that the way to understand?

[Shanti Jain, executive]

New clause, that also we have fully provided now.

[Jai Mundhra, analyst]

All right, sir. And if you have the loan mix by benchmark, sir, EBLR, MCLR...

[Shanti Jain, executive]

So I'm telling you close to 60% is basically MCLR and around 34% is basically repo. The rest is fixed for external benchmark or base rate, earlier loan.

[Jai Mundhra, analyst]

And sir, if you had highlighted this that out of this new investment norms, we have -- we are in the money in the sense that there is some accretion to the reserves, AFS reserves and general reserves. if you can quantify, sir, how much is the addition to CET1 or Tier 1 basis the new investment norm as of April 1st.

[Shanti Jain, executive]

No, that is basically what happens you see, the interest rate, 10 years you say 1st April was, I think, 7.06% or so. Today, it is around 7.16% or 7.17%. So based on the movement in the GSA prices, this reserve is also plus or minus. And it will directly happen in the reserve side.

[Anand Dama, analyst]

Our next question will take from Suraj Das.

[Suraj Das, analyst]

Congratulations on a good set of numbers. A couple of questions. So you have done really well on the corporate book this quarter in terms of growth. And if I see within that, probably the segments which have done well is the other infra, construction and commercial real estate, where more or less on a sequential basis, the growth has been something like 5% to 6%.

So just wanted to check, sir, in terms of the other infra, what are the segments where probably this growth has come from? Is it solar or is it anything other? And what is the general yield that you were charging here?

[Shanti Jain, executive]

The other infra basically 3, 4 major sectors, like city gas. City gas is a new area where the construction is going on, pipelines and all. Smart metering is other area where the new developments are taking.

Data center is a new area where the developments are. Solar panel manufacturing and all these are new, new areas -- these are new and upcoming areas where we are giving loan and the margins here are slightly better.

[Suraj Das, analyst]

So in terms of blended interest rate here, it would be 11%, 12% or higher?

[Shanti Jain, executive]

No, no, no. Sir, 11%, 12%, you will not get a good quality customer. Competition intensity is very much.

[Suraj Das, analyst]

Okay. And then in terms of the construction and the commercial real estate, I mean here, if you can also highlight your strategy and probably what is the blended interest rate here?

[Shanti Jain, executive]

So what happens in commercial real estate are sir, there's huge opportunities. I'm telling you that the way the e-commerce is happening in the country, there are -- the data repository requirements and all have increased. Every day new data is created. So data center is a huge business opportunity for entrepreneur and for us to give LRD loan and all, right?

In office space also, we are giving. Even you see malls and all, now again full. So there are opportunities there also. And in each city, the warehouse is in all huge opportunity because now all these e-commerce companies are delivering goods in 1 day, even in 6 hours, 10 hours.

So there are -- in each city, there are warehouses. So huge opportunity is there in the LRD. And the interest rate we are getting because the cash flow is there. Cash flow is there and the promoters are solid. So slightly better interest rate than the 1 year MCLR or near to 1 year MCRL.

[Suraj Das, analyst]

Right. Understood, sir. And sir, I mean, barring LRD, what would be the general moratorium period during the construction for all these project loans?

[Shanti Jain, executive]

No, no, we are not giving -- we are not in the business of giving construction and then LRD. We are giving when the tenant is in place, money is coming. So you are assured that your cash flow is there, then we are entering.

[Suraj Das, analyst]

Okay. But for other infra segment, I mean generally, there will be some construction phase, right, for this solar or data centers?

[Shanti Jain, executive]

No, other infra all are very, very good companies. All are AA, AAA rated companies. And they have taken various districts in India, right, various districts. So they are performing companies, good debt equity. So there we are giving. Quality of [indiscernible] and rating is also better, even AA on that.

[Suraj Das, analyst]

Sure, sir. Okay. Understood. And sir, 1 last question in terms on Slide 29, a more technical question in nature. If you can clear the difference between AUC recovery and the MOI recovery. I mean what is the meaning of these 2 line items if you can...

[Shanti Jain, executive]

What happens, MOI is interest recovery, right? So interest recovery will go straight away to interest income. And other than MOI will go to a reduction in outstanding or if it is a written-off account, it will go straight to income account.

[Suraj Das, analyst]

Okay. So this INR 184 crores also goes to the interest income line item that we reported.

[Shanti Jain, executive]

INR 184 crores has gone to the interest.

[Anand Dama, analyst]

We'll take the next question from Sushilji.

[Sushil Choksey, analyst]

Congratulations Jain saab and management team of Indian Bank for excellent performance. Sir, in your tenure if many more transformation have to happen or the transformation journey which you have started since you've joined, what are the things which you would like to see that has rolled out and where you see a maximum benefit for Indian Bank's future?

[Shanti Jain, executive]

So thank you Chokseyji first for you compliments. And I request Bajajji to give you -- then I'll give you what is the impact on the bank.

[Mahesh Bajaj, executive]

No, in fact, when we go with these digital journeys, one side, we are improving our asset quality, other -- sorry, one side, we are improving our asset quality, other side, the TAT is improved. So during the last financial year, we did almost INR 81,000 crores of business through this digital journey. And this year, we are again planning to cross more than INR 1 lakh crore, which is monthly more than INR 10,000 crores now run rate is there at present.

So apart from that, one more, the major -- the projects which we have taken out that is on the new mobile app that is omnichannel, which we are going to start very shortly. It will be, again, a Superapp kind of thing, which is with similar experience on all channels of access, maybe a mobile app or Internet banking.

Even if the journey is started on one channel can be completed on other channel. So this will help us in reducing our operating costs and improving our asset quality. So these are the 1 or 2 journeys with the projects which we have taken almost on the completion stage.

Apart from that, various other -- on the infrastructure, we have done. We -- now I was telling during the presentation, we are coming up with the [indiscernible] site also. And on the infrastructure also, most of the fixed assets from that maybe a laptop, desktop, the ATM, all those things we have changed during the last financial year, last 2 years.

And a lot of changes have been brought in on the infrastructure at -- in the cyber stock also, on the security front also. So almost INR 300 crores spent is there on the cyber stock. And almost on the transformation itself, we are spending every year, INR 500 crores to INR 600 crores. And going forward it is going to be -- we have committed more than INR 700 crores to INR 800 crores for the next 3 or 4 years, sir.

[Shanti Jain, executive]

So Chokseyji, now I'll tell you that basically -- what is bank? Bank is basically a talent and a technology and a customer. On the talent side, how we are doing our business. First of all, the business itself or large corporate branches takes care of about 76% of large corporate front business. We are having 27 MCBs, which we are added and 5 or 7 more we are adding. So this MCB is the business, INR 25 crores to INR 150 crores where we are getting good margins and the growth here is around 23%.

But the LCB and MCB, you need good people who understand the credit, who can deliver. So what we have done? We have given the training in-house and outside to our people. First, we have recruited people in all cadres, whether it's a scale 1, 2, 3, 4, because not only our people outside people also -- we've recruited people from the market also to manage our this LCB and MCB business.

Now, third point is that other business is MSME business or a retail business. There also the knowledge, soft skills are required. So what we have done, we have given around 30,000 people training in the last year, 30,000 people, and we are giving training all our branch heads, all our MAPC heads, all our RAPC heads, right?

And time to time, we are having their meeting also. So they have a positivity, they have energy, they have understanding of the business. So that way, all these good engines are working. Likewise, our -- even I'm telling our SHG is a good business for us.

Even on SHG, people are giving training to the other branch managers to have SHG business in other part of the country where the government is supporting even recovery of assets. Our gold loan branches are given training to other branches managers to have a gold loan business because this business we are doing from a number of decades.

So -- and for all kind of training, support, soft skill, leadership development, all kind of training, we are giving, all kind of recruitment we are doing, we are -- even at the top level, we are recruiting from the markets.

On the talent side, we -- but then everybody is being trained based on their area of interest, right? And on that area of interest, they are getting posting also based on their area of interest. Likewise, in technology also, we are doing a number of things. In the core side also we have done -- even today, our core, the capacity utilization is close to 60%, and we have feature where we can increase any time, only we have to -- servers are all in place and we have to give pay license fees and then we increase this number.

In the middle of the year, we have started digital -- the omnichannel we started, digital lending we started, [indiscernible] we started. In the network side also, we've a number of things, all our branches are having 5 kbps -- SD-WAN. Server centralization we have done. DMS, we have -- huge things we have done and all is contributing to the growth of the bank, and it will continue to grow. And in that point, 78 journeys, which we have done -- I'm telling you, we are having INR 80,000 crores of business.

[Sushil Choksey, analyst]

Sir, paucity of time, I'll ask you a question added to this led by our transformation journey of digital banking and Indian Bank shared service, where do you see your cost to income and number of products which you will be able to sell to your customers over a period of the next 1 or 2 years?

[Shanti Jain, executive]

So you see our cost-to-income ratio was 45%. It was the 44% last year. And in the current year, it is around 45%. Because of the huge employee cost this time we have booked on account of this. So we would like to bring back this cost-income ratio below 44% in the time to come. And that can happen only with your previous income and your better margins. So we are working on that, and you see we are able to maintain 42% CASA.

And what happened -- even the liability side also we have done segmentation, we have [indiscernible] various state capitals we opened. Even resource acquisition centers we are planning to open around -- so far, already opened around 75 centers. We want to slowly, slowly move to 200 centers where the money is. So wherever money is there, we are there.

[Sushil Choksey, analyst]

So are you sensing a large manufacturing business in Tamil Nadu and adjoining areas where Indian Bank has a large presence?

[Shanti Jain, executive]

Yes, Indian Bank, we are having around 25% of balance sheet from Tamil Nadu.

[Sushil Choksey, analyst]

No, no. Are you sensing large manufacturing opportunities?

[Shanti Jain, executive]

Yes, opportunities are there. Large is also there, mid is also there. That is why my mid-corporate business has grown 23%.

[Sushil Choksey, analyst]

Sir, because of paucity of time, I'll take further questions offline with you.

[Shanti Jain, executive]

Okay, no problem. And we started our subsidiary as well.

[Anand Dama, analyst]

Yes, thank you all the participants. Thank you, MD sir for allowing us to host this call. Sir, do you have any closing remarks to make? And in case basically, you have any data on the project financing stuff which one of the participants has asked, you can share the same?

[Shanti Jain, executive]

The project financing data we have to see. Actually, this is -- account by account, we have to see. So it will take time and then offline, I will tell you. But at the same time...

Thank you, all analysts and investors for continuous interest in the bank and also guiding us. This all will go a long way for improvement in our business. Thank you.

[Anand Dama, analyst]

Thank you, sir. Thank you all participants. With that, we'll end the call. Have a great evening.